Buying a Lot to Build On in BC: Services, Permits and Costs

Buying a lot lets you build the home you want, but the price of the land is only the start: zoning, title, services, permits and charges decide what you can build and what it will cost. Here is what to check before you buy a lot in BC, and how permits, warranty, taxes and financing fit together.

The short version

Zoning and what's on title

Under BC's small-scale housing rules, most urban lots once zoned for a single house or duplex now allow three to four units depending on lot size, or six on larger lots near frequent transit, and every community must allow a secondary suite or laneway home, as I explain in More Homes per Lot. Title can narrow what zoning allows:

• Section 219 covenants. Held by a body such as the Province or the city, they can restrict how land is used, whether and how it is built on, and whether it can be subdivided, and they bind future owners.
• Building schemes. A developer selling two or more lots can register restrictions for the whole development that bind every lot and every future owner. In Surrey, a lot under a building scheme needs design approval with the permit application.

Ask your lawyer or notary for copies of every charge, not just the list on the title search.

Water, sewer, power and gas

Ask the city what services the lot has and what it will require. Surrey, for example, tells applicants which engineering service upgrades are needed and what they cost, and a house with a basement needs a gravity storm connection.

• Power. You or your electrical contractor apply to BC Hydro, which needs an electrical permit and your approval of the fees before it connects the home. More complex connections go through its design process.
• Gas. FortisBC handles new gas service at construction sites, but check your city's Zero Carbon Step Code level first, since it may decide whether gas makes sense for heat and hot water.
• Septic and wells. Without city sewer, a septic system must be designed and installed by an authorized person, a professional engineer or a Registered Onsite Wastewater Practitioner, who files it with the health authority. Surrey asks for Fraser Health's septic approval, and a hydrogeologist's report for a well.

Slopes, trees and archaeology

• Geotechnical reports. Under the Community Charter, if a building inspector thinks a lot may be subject to flooding, erosion, land slip or similar hazards, they can require a qualified professional's report certifying it can be used safely. If the report says it can't, no permit is issued; if it can, a permit is issued only with a covenant on title limiting use to what the report certifies.
• Trees. Check the city's tree bylaw. In Surrey, removing a tree at least 30 cm in diameter at breast height, or certain species even below that size, needs a permit, and you may need to plant two replacement trees for each one removed, backed by a deposit.
• Archaeology. The Heritage Conservation Act protects archaeological sites on public and private land, whether or not they have been recorded. You can ask the Province's Archaeology Branch, free of charge, whether a lot has a recorded site, but a clean result isn't a guarantee. If a site is present, disturbing it needs a permit, and the owner pays for the archaeological work.
• A house to demolish. You will generally need a demolition permit from the city, and WorkSafeBC says to have the house tested for asbestos before demolition starts.

The building permit and the Step Code

By law, the city can't issue a building permit for a new home without proof, on BC Housing's form, that a licensed residential builder with home warranty insurance, or an owner builder, will build it. In Surrey, the application also includes a current title search, a set of drawings and energy documents. Inspections follow at set stages, and you must pass a final inspection before anyone moves in.

• BC Energy Step Code. Since May 1, 2023, the BC Building Code has required new construction to be 20% more energy efficient, which for houses means Step 3. Cities can require higher steps by bylaw.
• Zero Carbon Step Code. Its four levels deal with a home's greenhouse gas emissions, from simply measuring them (EL-1) to operating as close to zero as possible (EL-4). Cities choose which level, if any, applies.
• It varies. Surrey asks new houses to meet Step 3 and EL-1, while Port Moody requires a higher energy step. Ask your city early.
• An energy advisor. You will generally need one to model the design and test the home's airtightness.

Who builds it

• A licensed builder. Anyone in the business of building homes must be licensed by BC Housing, and a new home must be registered for home warranty insurance before it is built.
• You, as an owner builder. You need an Owner Builder Authorization from BC Housing, which means passing an exam and building for your own use. You must build or directly manage the construction yourself: you can hire trades, but not a builder or construction manager to run the project. You generally can't sell or rent the home for a year after it is built, and you are personally responsible for defects for 10 years.

I explain 2-5-10 coverage and owner-built homes in New Home Warranty in BC.

Development cost charges and other costs

• Development cost charges. DCCs help pay for new or expanded sewer, water, drainage, parks, roads and other infrastructure, and are collected at subdivision or when a building permit is issued. A building with fewer than four homes is exempt unless the city's DCC bylaw says it will be charged at building permit, and some bylaws, such as Abbotsford's, do. A fourplex or larger doesn't get that exemption.
• Amenity cost charges. Since November 30, 2023, municipalities and regional districts have been able to adopt these charges, also collected at subdivision or building permit, to help pay for amenities such as community centres, libraries and daycares.
• GST. If you build, or hire someone to build, your own home, you may be able to claim back GST you paid during construction through the CRA's GST/HST new housing rebate or, for first-time buyers, its first-time home buyers' GST/HST rebate, each with its own conditions; you generally have two years to apply.
• Property transfer tax. You pay it on the lot's fair market value when the transfer is registered, at the usual rates, which I set out in Closing Costs in BC.

Two exemptions can apply if you build and move in within the first year after registration and meet their other conditions, including limits on lot size: the first-time home buyers' exemption, if the land's value at registration plus the cost to build is under $835,000 (or under $860,000 for a partial exemption), and the newly built home exemption, if the two total $1,100,000 or less, claimed as a refund 12 to 18 months after registration. Building and moving in within a year is tight, so budget for the tax.

Financing the build

A construction mortgage typically pays out in stages, or draws, as the work progresses, with interest-only payments on the amount advanced during construction. Some published terms:

• RBC. In its example, the first draw is 65% of the lot's appraised value, later draws follow inspections of the work, and part of each draw is held back for a time under provincial requirements.
• Vancity. Interest-only payments for up to 24 months or until construction is complete, whichever comes first, and financing of up to 80% of the home's finished market value. Its construction mortgages aren't available in all areas of BC.
• CMHC. Its mortgage insurance can be used for new construction paid out in progress advances, where the value is under $1.5 million.

Since the first draw may cover only part of the lot, plan to fund more of the land yourself, and talk to a mortgage professional early.

Questions buyers often ask me

Do I have to pay development cost charges to build a house?

It depends on the city. A building with fewer than four homes is exempt unless the city's DCC bylaw charges it at building permit, as some do, and DCCs may have been paid when the lot was created. Ask the city what will be due.

Can I build my own house in BC?

Yes, as an owner builder with BC Housing's authorization, which means passing an exam and building or directly managing the work yourself. Otherwise, a licensed residential builder has to build it, with home warranty insurance.

Do I pay property transfer tax on a vacant lot?

Yes, on its fair market value when the transfer is registered. If you build a home, move in within the first year and meet the other conditions, the first-time home buyers' or newly built home exemption may reduce or refund it.

What does the BC Energy Step Code mean for my build?

Since May 1, 2023, the BC Building Code has required houses to meet at least Step 3. Your city can require a higher step or a Zero Carbon Step Code level, and an energy advisor models the design and tests the finished home.

How does a construction mortgage work?

The lender pays out the loan in stages as the work progresses, and you make interest-only payments on the amount advanced until the home is finished. Part of each draw may be held back for a time under provincial requirements.

Planning a build? Read what BC's small-scale housing rules allow, how 2-5-10 warranty coverage works and what to budget at closing.

This article is general information, not legal or tax advice. Charges, permit requirements, tree bylaws and Step Code levels differ by city, so confirm them with the city and your own professionals before you remove subjects; the details were current at the time of writing. For the Province's guide, see development cost charges.